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Comment by YmiYugy | Hacker News Reader

It seems a bit odd that data center operators aren’t willing to put their money where their mouth is. Data center operators say: expand more quickly. TSMC says: we need long term demand to justify that. And all the data center guys say is: don’t worry that won’t be an issue, trust us. I would think that if they were serious they would commit to cofinancing new foundries or signing long term minimum purchasing agreements.

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Semiconductors is extremely cyclical. One of the reasons TSMC survived the previous boost-boom cycles is their caution. If you overexpand, you risk going out of business in the next downturn.

AFAIK only Apple has been commiting to wafers up to 3 years in the future. It would be a crazy bet for NVidia to do the same, as they don't know how big will be the business.

The data center builders are hesitant, too.

https://youtu.be/K86KWa71aOc?t=483

If the long term demand disappears, there may not be anyone left for TSMC to collect from on those MPA. This somewhat undermines their utility as a security.

I think if Microsoft or Google or Nvidia or Amazon went to TSMC and said hey we guarantee to buy 3 fabs worth of chips from you for the next 10 years, they'd probably find a way to make that work.

> I would think that if they were serious they would commit to cofinancing new foundries or signing long term minimum purchasing agreements.

That would ruin TSMC and others' independence.

Nvidia already did buy Intel shares so it is a thing.

Nvidia did discuss with TSMC for more capacity many times. It's not about financing or minimum purchasing agreements. TSMC played along during COVID and got hit.

How do you figure? Demand for electronics skyrocketed when everyone working from home bought new laptops webcams, tablets. There was a fire on a TSMC manufacturing line that caused a shortage early on but capacity recovered, demand stayed strong throughout and there was a massive spike at the end when car manufacturers needed to ramp back up to handle all the paused orders.

As far as I know there was never a demand dip at any point in there.

> there was a massive spike at the end when car manufacturers

Which barely impacts TSMC. Most of their revenue and focus is on the advanced nodes - not the mature 1s.

> As far as I know there was never a demand dip at any point in there.

When did I imply there was a demand dip? I said they built out too much capacity.

What happened during COVID? Could you please explain shortly what they agreed to, and how it bit them?

And what of the natural resources sustaining all of this? This conglomerate of data centers, gpus and other chips will surely have to push manufacturers to the maximum in other industries. I don't think sustainable energy, recycling and carbon credits will be enough to cover for it.

ASML doesn't quite do overnight orders for lithography machines. There is limited construction capacity to build new data centers. Expanding power generation and grid capacity is also a whole can of worms. My point is just that tech CEOs keep saying "build more fabs" and TSMC saying "we worry about long term demand" and the CEOs replying along the lines of "AI is so big you couldn't possibly have too much capacity" rather than going "here is a contract to guarantee we'll buy your capacity".

> ASML doesn't quite do overnight orders for lithography machines.

I was not even aware of that, thanks for clarifying. I need to read on this.

Ultimately, I think there is a disconnection with reality between these CEOs and major fabrics such as TSMC.

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